Why invest in ELSS

Seven reasons to invest in ELSS

What is ELSS?

ELSS is short for equity-linked savings schemes.

They are a type of diversified equity mutual fund, in which the fund manager invests in both equity and debt.

The investments can therefore be in shares of listed companies or money market instruments.

So should you invest in ELSS?

In one word: yes, since ELSS offers several benefits to investors.

One: You save taxes

Your investment in ELSS is eligible for tax exemption up to `150,000 under Section 80C of the Income Tax Act, 1961. Also, the returns on ELSS are tax-free.

Two: Your money grows

Since an ELSS is a mutual fund that invests in equity, the value of your investment grows as the stock market index rises.

Three: You invest long-term

An ELSS has a lock-in period of three years, improving the chances of your money growing in the long term.

Four: You receive dividends

You can opt to receive dividends on your ELSS investment, thus generating income even during the lock-in period.

Five: You get higher returns

In the long term, ELSS can outperform non-equity instruments like National Savings Certificate (NSC) and Public Provident Fund (PPF).

Six: You invest regularly

If you invest in ELSS through SIP (Systematic Investment Plan), you make monthly payments, hence enforcing the habit of investing regularly.

Seven: You enjoy optimal lock-in period

While PPF and NSC have lock-in periods of 15 years and six years respectively, ELSS has a lock-in period of only three years.